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Wholesale funding dry-ups

Christophe Perignon (), David Thesmar and Guillaume Vuillemey

No 49, ESRB Working Paper Series from European Systemic Risk Board

Abstract: We empirically explore the fragility of wholesale funding of banks, using transaction level data on short-term, unsecured certificates of deposits in the European market. We do not observe any market-wide freeze during the 2008-2014 period. Yet, many banks suddenly experience funding dry-ups. Dry-ups predict, but do not cause, future deterioration of bank performance. Furthermore, in periods of market stress, banks with high future performance tend to increase reliance on wholesale funding. Thus, we fail to find evidence consistent with classical adverse selection models of funding market freezes. Our evidence is in line with theories highlighting heterogeneity between informed and uninformed lenders. JEL Classification: G21

Keywords: asymmetric information; market freezes; wholesale bank funding (search for similar items in EconPapers)
Date: 2017-06
New Economics Papers: this item is included in nep-ban
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Related works:
Journal Article: Wholesale Funding Dry‐Ups (2018) Downloads
Working Paper: Wholesale Funding Dry-Ups (2017) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:srk:srkwps:201749

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